Electric vehicles cost set to match fuel cars by 2027: report
Updated 15 September 2023
ARAB NEWS
RIYADH: The cost of electric vehicles is expected to match that of fuel-powered cars of similar size and configuration by 2027, according to a new report from research firm Gartner Inc.
The report forecasted an accelerated global adoption of EVs in the coming years but also outlined potential obstacles relating to power infrastructure.
Gartner’s research anticipates global battery electric vehicle shipments to grow by 22.22 percent to reach 11 million units by 2023, up from 9 million units in 2022.
Additionally, the report expects nearly 15 million battery electric and plug-in hybrid cars to be shipped worldwide in 2023, rising 19 percent year-on-year to 17.9 million units in 2024.
The plug-in hybrid vehicles market is also expected to expand, albeit at a slightly slower pace, growing from 3 million units in 2022 to 4 million units in 2023.
Despite the promising numbers, Gartner’s report indicated potential challenges with regard to power generation and distribution.
“Unless countries take actions to incentivize EV drivers to charge outside peak electricity consumption periods, the switch to EVs may put an additional strain on both the power generation capacity and the distribution infrastructure,” said Jonathan Davenport, senior director analyst at Gartner.
By 2024, nearly 18.5 million EVs — including cars, buses, vans, and heavy trucks — are projected to be shipped, with electric cars constituting 97 percent of these shipments.
In the Gulf region, primarily the UAE and Saudi Arabia, significant steps are being taken to promote electric mobility, the report noted.
Saudi Arabia’s Public Investment Fund owns over 60 percent of California-based EV maker Lucid and has committed to purchasing up to 100,000 Lucid vehicles over the next 10 years.
Among other developments, Ceer, the Kingdom’s first EV brand, recently received an industrial license from the Saudi Ministry of Industry and Mineral Resources.
In the UAE, the Minister of Energy and Infrastructure recently announced the launch of the Global EV Market, a comprehensive project that saw the forming of several partnerships with major industry stakeholders such as Audi, Siemens, BMW, and General Motors.
The UAE also secured fourth place in a global ranking for affordable EV charging infrastructure, as assessed by Compare the Market Australia.
According to a report by management consultancy Arthur D. Little, the UAE’s EV market is expected to grow at an annual rate of 30 percent between 2022 and 2028.
Saudi Arabia advances renewable goals with 5,500 MW solar PPAs
Updated 26 June 2024
ARAB NEWS
RIYADH: Saudi Arabia is set to add 5,500 megawatts of solar energy following the signing of three deals by its principal buyer, advancing its strategy to enhance renewable sources.
The Saudi Power Procurement Co. finalized power purchase agreements for three new solar photovoltaic projects with ACWA Power Co., Water & Electricity Holding Co., also known as Badeel, a wholly-owned subsidiary of the Public Investment Fund, and Aramco Power.
This comes as Saudi Arabia’s National Renewable Energy Program aims to achieve the Kingdom’s target energy mix of 50 percent renewables by the end of this decade, supporting efforts to reduce liquid fuel consumption and aligning with Saudi Vision 2030 objectives for the energy sector.
The PPAs, signed by Saudi Minister of Energy Prince Abdulaziz bin Salman Al-Saud, are integral to the NREP supervised by the ministry.
The solar projects include Haden Solar PV and Al-Muwaih Solar PV, both located in the Makkah region, each with a capacity of 2,000 MW. The third project, Al-Khushaybi PV in Qassim Province, has a total capacity of 1,500 MW.
Saudi Arabia plans to begin awarding contracts for new renewable energy projects in 2024, aiming for a maximum capacity of 20 gigawatts. By 2030, the goal is to achieve a capacity between 100 and 130 gigawatts, contingent on the growth of electricity demand, the ministry said.
Since the inception of the renewables program, a total of 21 projects have been awarded, amounting to 19 GW in capacity.
Currently, seven projects totaling 4.1 GW are operational and connected to the grid, while eight projects with a total capacity of 8.2 GW are under construction. Additionally, six projects totaling 7 GW are in the final stages of financial closure.
Furthermore, six additional renewable energy projects with a combined capacity of 6.7 GW have been put out to bid since the beginning of 2024.
Further capacities are planned to be tendered before year-end to achieve the target of tendering 20 GW annually.
In May, SPPC signed two PPAs with a consortium led by Japan’s Marubeni Corp. in Tokyo. These agreements were part of the fourth phase of Saudi Arabia’s NREP, overseen by the Ministry of Energy.
The agreements pertain to the Al-Ghat wind power project, with a capacity of 600 MW, and the Waad Al-Shamal wind power project, with a capacity of 500 MW. These agreements were signed during the Saudi-Japan Vision 2030 Business Forum held in Japan.
Saudi Aramco to buy 5m tonnes of LNG annually from US-based Sempra
Updated 26 June 2024
ARAB NEWS
RIYADH: Saudi Aramco has agreed to buy 5 million tonnes of liquefied natural gas per annum from US-based company Sempra over a 20-year period.
This deal follows the announcement by the subsidiaries of both firms that they have executed a non-binding Heads of Agreement for a sale and purchase deal, through which the oil giant will receive LNG from the Port Arthur LNG Phase 2 expansion project in Texas, according to a statement.
Port Arthur LNG is a natural gas liquefaction and export terminal in Southeast Texas with direct access to the Gulf of Mexico.
This move falls in line with Aramco’s 25 percent participation in the project-level equity of Phase 2.
It also aligns well with the firm’s belief that LNG can be a transition energy that could help reduce the burning of fuels such as coal and fuel oil, lessen greenhouse gas emissions, and maintain global energy security.
“We are excited to take this next step into the LNG sector. As a potential strategic partner in the Port Arthur LNG Phase 2 project, Aramco is well placed to grow its gas portfolio with the aim of meeting the world’s growing need for lower-carbon sources of energy,” Aramco Upstream President Nasir Al-Naimi said, adding that the deal is a “major step” in the company’s strategy to become a leading global LNG player.
Sempra Chairman and CEO Jeffrey Martin said the planned expansion of Port Arthur LNG would help facilitate the broad distribution of US natural gas across global energy markets.
He added: “By expanding the global reach of the Port Arthur LNG facility, we have the opportunity to improve energy security while providing a lower-carbon alternative to coal for electricity production.”
The Port Arthur LNG Phase 1 project is currently under construction and consists of trains 1 and 2, as well as two LNG storage tanks and associated facilities.
On the other hand, the Port Arthur LNG Phase 2 project is a competitively positioned expansion of the site to include the addition of up to two trains capable of producing up to 13 million tonnes per year.
Closing Bell: TASI ends in red, closes at 11,656 points
Updated 26 June 2024
ARAB NEWS
RIYADH: Saudi Arabia’s Tadawul All Share Index fell on Wednesday, losing 74.42 points, or 0.63 percent, to close at 11,656.35.
The total trading turnover of the benchmark index was SR5.46 billion ($1.46 billion) as 109 of the listed stocks advanced, while 117 retreated.
Similarly, the MSCI Tadawul Index decreased by 12.46 points, or 0.85 percent, to close at 1,458.50.
The Kingdom’s parallel market Nomu also dropped by 67.77 points, or 0.26 percent, to close at 26,355.33. This comes as 37 of the listed stocks advanced while as many as 30 retreated.
The best-performing stock of the day was Miahona Co., with its share price surging by 8.92 percent to SR24.90.
Other top performers include Rasan Information Technology Co. and Gulf Insurance Group, whose share prices soared by 5.91 percent and 5.42 percent, to stand at SR60.90 and SR31.10 respectively.
In addition to this, top performers included Saudi Reinsurance Co. and Al-Rajhi Co. for Cooperative Insurance.
The worst performer was ADES Holding Co., whose share price dropped by 4.60 percent to SR20.32.
Other worst performers were ACWA Power Co. as well as Ataa Educational Co., whose share prices dropped by 3.26 percent and 2.89 percent to stand at SR344.20 and SR60.40, respectively.
Another poor performer was Bank Albilad, with its share price dropping by 2.40 percent to SR32.60.
In the parallel market, Nomu, Saudi Parts Center Co. was the top gainer, with its share price surging by 8.73 percent to SR59.80.
Other top gainers in the parallel market were Munawla Cargo Co. and Abdulaziz and Mansour Ibrahim Albabtin Co., with their share prices surging by 8.63 percent and 7.32 percent to reach SR151 and SR44, respectively.
Yaqeen Capital Co. was the major loser on Nomu, as its share price fell significantly by 19.37 percent to SR32.25.
Natural Gas Distribution Co. and Neft Alsharq Co. for Chemical Industries were other major losers on Nomu. Their share prices dropped by 7.65 percent and 3.88 percent, reaching SR45.25 and SR3.96, respectively.
Other underperforming stocks include Saudi Lime Industries Co. and Professional Medical Expertise Co.
On the announcement front, Saudi Tadawul Group Holding Co. has signed a binding sale and purchase agreement with DME Holdings Ltd. and its current shareholders – Eagle Commodities Ltd., New York Mercantile Exchange Inc., and Tatweer Dubai LLC.
The Group invested SR107 million by acquiring a 32.6 percent stake in DME Holding Limited representing a combination of new and existing shares.
Due to the planned transaction, Tadawul Group will make an indirect investment in Dubai Mercantile Exchange Ltd., a subsidiary of DME Holdings regulated by the Dubai Financial Services Authority.
Furthermore, the group will hold an equal position as the largest shareholder in DME Holdings alongside CME.
Saudi Aramco tops world’s largest oil companies in proven reserves
Updated 26 June 2024
ARAB NEWS
RIYADH: Saudi Arabia’s energy giant Aramco has topped a list of the world’s largest oil companies in terms of proven reserves, boasting figures 15 times greater than its nearest competitor, according to newly calculated figures.
Statista, a German online platform for data gathering and visualization, reported that Saudi Aramco’s oil and gas reserves were estimated at around 259 billion barrels of oil equivalent for 2022.
These reserves surpasses the combined total of ExxonMobil Corp., Chevron Corp., TotalEnergies SE, Shell plc, BP, and Eni.
ExxonMobil Corp. recorded reserves of 17.7 billion barrels of oil equivalent, followed by Chevron Corp. with 11.2 billion barrels.
The size of Aramco’s reserves echo its revenue streams, with the state-run oil giant the world’s most profitable company, generating $716.2 billion in profits between 2016 and 2023, based on the company's annual financial results.
It also produced 12.8 million barrels of oil a day on average in 2023.
Statista highlighted that Saudi Aramco’s reserves figures are based on the terms of its concession, which limits its exploration and development ability to certain areas.
On a separate note, Statista reported that the Kingdom’s oil reserves amounted to 40.9 billion tonnes in 2020.
“Saudi Arabia has one of the largest oil reserves in the world, accounting for about one-fifth of the world’s conventional oil sources,” the data platform stated.
Moreover, according to a US Energy Information Administration study, the proven international oil and natural gas reserves of 187 publicly traded exploration and production companies decreased by 5.6 billion barrels of oil equivalent in 2022. This represents a 2 percent decline based on the firm’s annual financial reports.
The analysis, which was released in July 2023, stated that the proven reserves held by these public companies declined by 9 percent in 2020, primarily due to the economic impacts of the COVID-19 pandemic, but reserves increased in 2021.
In 2022, some major oil companies, including TotalEnergies and BP, withdrew from Russia. These divestments reduced the total proven reserves reported by exploration and production companies by 12 billion barrels of oil equivalent that year.
On June 2, 2024, Aramco begun the sale of more than $10 billion worth of shares in what was the second public offering from the firm.
The final price for the secondary share sale was set at SR27.25 ($7.26), and the company’s allocation to international investors reached 0.73 percent of total shares following the completion of the new issue.
Saudi Islamic banks positioned for robust growth amidst economic expansion: Fitch Ratings
Updated 26 June 2024
Dayan Abou Tine
RIYADH: Saudi Islamic banks are poised to maintain a robust performance this year and in 2025, buoyed by non-oil economic growth and favorable operating conditions, a new report stated.
According to Fitch Ratings, these banks leverage a substantial retail customer base which helps improve profitability, secure lower-cost funds, and maintain high-quality, diversified assets.
In the Kingdom, where all residential mortgages must comply with Islamic law, strong demand for Shariah-compliant financial products leads individuals to Islamic banks for mortgages and other services, thereby increasing deposits.
“In general, financing growth has outpaced lending over the past few years, supported by the requirement for residential mortgages to all be Shariah-compliant. Islamic banking is dominant in Saudi Arabia, with the largest proportion of Islamic financing (85 percent) of any country that allows conventional banks to operate alongside Islamic banks,” the agency added.
Customers’ trust in Islamic banking principles further encourages them to deposit funds in banks that uphold these values. Additionally, mandatory Shariah compliance for mortgages also solidifies Islamic banks as the preferred option for such financing.
Asset quality
According to the report, Islamic banks demonstrate a better impaired financing ratio compared to conventional banks, attributed to their lower exposure to risky corporate financing. This ratio stood at 1.5 percent for Islamic banks, contrasting with slightly over 2 percent for conventional banks.
Islamic banks also improved their impaired financing ratio from 1.7 percent in 2022 to 1.5 percent in 2023, indicating enhanced loan performance.
This progress was bolstered by robust financing growth, which facilitated portfolio diversification and reduced overall risk. Favorable economic and regulatory conditions further supported these gains, leading to better borrower performance and reduced default rates.
This key financial metric, also referred to as the non-performing financing ratio, is used to evaluate the quality of loans within banks or financial institutions. It specifically measures the proportion of loans that are experiencing difficulties or are at risk of default.
Profitability
According to the agency, Islamic banks show higher profitability with operating profit relative to risk-weighted assets exceeding 3 percent, compared to approximately 2.5 percent for conventional banks.
In 2023, sector profitability remained stable at high levels, despite facing increased funding costs that offset the benefits from credit growth and reduced impairment charges.
Islamic banks stood out with profit exceeding that of conventional banks, largely due to their ability to maintain higher margins supported by lower funding costs.
This advantage stemmed from their strong retail franchises, which attracted a larger base of non-profit-bearing deposits compared to conventional banks. These stable and cost-effective funding sources allowed Islamic banks to sustain profitability levels above their counterparts, highlighting their resilience in a challenging financial environment.
Fitch Ratings produced the report analyzing the Saudi Islamic banking sector. Shutterstock
Capital levels
Islamic banks maintained a strong capitalization with an average common equity Tier 1 ratio of 16.4 percent as of the end of 2023, closely aligned with conventional banks’ ratio of 16.6 percent.
This ratio indicates robust core equity capital relative to risk-weighted assets, ensuring solid financial stability. Additionally, Islamic banks’ lower risk-weighted assets to total assets ratio of 70 percent — compared to 84 percent for conventional banks — reflects a strategic emphasis on retail banking and reduced off-balance-sheet activities.
These factors collectively enhance Islamic banks’ resilience by minimizing risk exposure and supporting sustainable growth amid challenging financial conditions.
Conventional banks’ capital adequacy ratio, which measures their financial health by comparing capital, including equity and reserves, to risk-weighted assets, ensuring sufficient capital to absorb potential losses, stood at around 20 percent, similar to Islamic banks.
Al Rajhi Banking stands out by having a more diversified retail deposit base than other institutions. Shutterstock
Funding and liquidity
As of the end of 2023, customer deposits constituted 80 percent of the funding for Islamic banks, slightly less than the 84 percent observed for conventional banks, the agency noted in its report.
Islamic banks saw their average financing-to-deposits ratio rise to 102 percent, up from 99 percent in 2022, indicating that their financing activities grew faster than their deposit base.
Fitch Ratings noted that deposit concentration, where a substantial proportion of a bank’s deposits originates from a limited number of depositors or sources, tends to be prevalent among Islamic banks.
However, Al Rajhi Banking and Investment Corp. stands out due to its advantage of having a more diversified retail deposit base.
Despite challenging financial conditions, Islamic banks have effectively managed liquidity, supported by increased availability of government sukuk and liquidity-management tools provided by the central bank.
These measures ensure that Islamic banks maintain adequate liquidity levels to meet their financial obligations and operate smoothly amidst fluctuating market conditions.
According to another June report from the agency focusing on emerging markets debt, Saudi Arabia is actively working to expand and strengthen its sukuk and debt markets.
This strategic initiative is primarily motivated by the Kingdom’s need to address budget deficits effectively. By deepening these markets, Saudi Arabia aims to not only raise essential funds to bridge fiscal gaps but also to foster greater liquidity and diversification within its financial sector.
This approach not only supports the government’s financial planning and infrastructure development goals but also strengthens the overall resilience and attractiveness of the Kingdom’s capital markets on a global scale.
Saudi Arabia’s sukuk and debt capital market have demonstrated robust growth, with annual increases of 7.9 percent overall and 9.6 percent for unlisted issuances, as reported by the Capital Markets Authority in the same month.
The market size for unlisted sukuk and debt expanded from SR72 billion ($19 billion) in 2019 to approximately SR105 billion by 2023. Corporate sukuk and debt reached SR125 billion by 2023, up from SR95 billion in 2019, with the number of issuing companies tripling.
Government contributions dominated, comprising 70 percent of the market at SR529.8 billion by 2023. Market activity surged, with traded value hitting SR2.5 billion and transactions rising to 36,961.
The Capital Market Authority aims to enhance market attractiveness through regulatory improvements and infrastructure expansions, supporting economic diversification and international investor interest in Saudi Arabia.
According to Fitch Ratings, in 2024, GCC countries, Malaysia, Indonesia, and Turkiye have significantly increased their issuance of US dollar-denominated debt within emerging markets, collectively accounting for 51 percent of total EM dollar debt, up from 43.7 percent in 2023 and 32.8 percent in 2020.
This rise reflects governmental efforts to develop debt capital markets, diversify funding sources, finance fiscal deficits, and manage maturing debts. Sukuk, a pivotal Islamic financing tool, comprised 12.4 percent of EM dollar debt issuance during this period.
Their inclusion in global bond indices has bolstered demand from international investors, prompting Fitch to upgrade ratings for several countries due to improved fiscal outlooks and investor-friendly policies.
Outlook
In Fitch Ratings’ outlook for 2024 and 2025, Saudi Islamic banks are anticipated to maintain robust standalone credit profiles.
This strength is bolstered by high oil prices and favorable operating conditions. However, strong credit growth is expected to exert pressure on banks’ capital, funding, and liquidity positions.
To mitigate these pressures, Islamic banks are likely to diversify their funding sources beyond traditional deposits. This diversification includes increasing reliance on wholesale funding options such as sukuk issuance, which are expected to play a larger role in their funding mix.
Despite this shift, deposits are anticipated to remain the primary and most stable source of funding for Islamic banks. Overall, while facing challenges related to capital, funding, and liquidity, Saudi Islamic banks are poised to uphold strong credit profiles supported by favorable economic conditions and strategic funding diversification efforts.
